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The most significant change to Inheritance/Gift tax planning in recent years has been the significant curtailing of Dwelling House relief set out under s. 86 of the Capital Acquisitions Tax Consolidation Act 2003. Up until 2016 the relief allowed a disponer to pass a number of different properties to a number of disponees tax free provided the recipient of the gift/inheritance had resided in the property for 3 years prior to transfer and did not hold any other interest in a residential property. Subject to certain claw back provision affecting a sale within a 6 year period the transfer was tax free constituting a hugely beneficial relief.
Following significant changes to the relief brought about in Finance Act 2016 Dwelling House relief has been essentially removed in relation to gifts of property. In relation to inheritances to avail of the relief as well as the beneficiary residing in the property for three years prior to the death of the disponer, the the dwelling house must be occupied by the disponer as his only or main residence at the date of his death (except where it passes to a dependent relative).
What has caused further confusion in relation to the scope of relief is the recent High Court case of Deane vs Revenue. In that case the court upheld the decision of the Tax Appeals Commission to allow the tax payer/appellant to avail of Dwelling House relief on the inheritance of her family home despite the fact that she had acquired an additional four properties under the same estate. Given the general restriction against the recipient of the said relief availing of same in a case where they held an interest in another dwelling house Revenue had previously taken the view that where a beneficiary had a beneficial interest in two dwellings at the date of inheritance the relief was not available. The court however found the inheritance of the interest in the other four properties taken under the estate did not mean that the tax payer had a beneficial interest in any other property at the time she in inherited the family home as she did not become beneficially entitled to the other properties until the net estate had been ascertained
On the basis of the recent High Court judgment Revenue have updated their manual to reflect the above however there is still some ambiguity given that the relevant legislation has not been updated and it could be argued that the updates to the Revenue manual are limited to the facts of the above case and do not fully cover the alteration made by the court to the test used to determine when a person is beneficially entitled to a property under the legislation.
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